Thursday, 24 August 2017

What’s next? – USDJPY 24.08.17

The dollar/yen was up 0.23 percent as of 07:50 GMT on Thursday to trade at 109.29, as the greenback recovered ground across the board and sentiment continued to improve despite Washington’s political turmoil putting key campaign promises on the line.

US equities fell under pressure on Wednesday following President Donald Trump’s threat to shut down the government over funding of his controversial wall in the US-Mexico border.

Those remarks also weighed on the American currency as they increased uncertainty over the future of key subjects for the Trump administration such as the long-awaited tax reform and the American Health Care Act, which is meant to repeal and replace the so-called Obamacare.

But losses on the dollar were capped by increasing speculation about the Jackson Hole symposium, where Federal Reserve Chairwoman Janet Yellen, European Central Bank President Mario Draghi and Bank of Japan Governor Haruhiko Kuroda are due to speak.

Investors believe central bankers will use the annual event to provide some guidance on future changes to current monetary policy configurations, such as the plan to unwind Fed’s massive $4.5 trillion balance sheet or reduce monthly bond purchases in the euro zone.

On the data front, initial jobless claims and existing home sales in the United States are up at 12:30 GMT and 14:00 GMT respectively. Japan will release its core CPI for July at 23:50 GMT.

From a technical perspective, we see strong support at the 108.50 level and it’s unlikely a break below it. A move to 111.00 seems like a more tangible option if Yellen speech cheers investors.